CIRCULAR
NO. A-76
REVISED 1999

August 4, 1983

TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS

SUBJECT: Performance
of Commercial Activities

Purpose.
This Circular establishes Federal policy regarding the performance
of commercial activities and implements the statutory requirements
of the Federal Activities Inventory Reform Act of 1998, Public
Law 105-270. The Supplement to this Circular sets forth the procedures
for determining whether commercial activities should be performed
under contract with commercial sources or in-house using Government
facilities and personnel.

In the
process of governing, the Government should not compete with
its citizens. The competitive enterprise system, characterized
by individual freedom and initiative, is the primary source
of national economic strength. In recognition of this principle,
it has been and continues to be the general policy of the
Government to rely on commercial sources to supply the products
and services the Government needs.

This
national policy was promulgated through Bureau of the Budget
Bulletins issued in 1955, 1957 and 1960. OMB Circular No.
A-76 was issued in 1966. The Circular was previously revised
in 1967, 1979, and 1983. The Supplement (Revised Supplemental
Handbook) was previously revised in March 1996 (Transmittal
Memorandum 15).

Policy.
It is the policy of the United States Government to:

Achieve
Economy and Enhance Productivity. Competition enhances
quality, economy, and productivity. Whenever commercial sector
performance of a Government operated commercial activity is
permissible, in accordance with this Circular and its Supplement,
comparison of the cost of contracting and the cost of in-house
performance shall be performed to determine who will do the
work. When conducting cost comparisons, agencies must ensure
that all costs are considered and that these costs are realistic
and fair.

Retain
Governmental Functions In-House. Certain functions are
inherently Governmental in nature, being so intimately related
to the public interest as to mandate performance only by Federal
employees. These functions are not in competition with the
commercial sector. Therefore, these functions shall be performed
by Government employees.

Rely
on the Commercial Sector. The Federal Government shall
rely on commercially available sources to provide commercial
products and services. In accordance with the provisions of
this Circular and its Supplement, the Government shall not
start or carry on any activity to provide a commercial product
or service if the product or service can be procured more
economically from a commercial source.

Definitions.
For purposes of this Circular:

A commercial
activity is one which is operated by a Federal executive
agency and which provides a product or service that could
be obtained from a commercial source. Activities that meet
the definition of an inherently Governmental function provided
below are not commercial activities. A representative list
of commercial activities is provided in Attachment A. A commercial
activity also may be part of an organization or a type of
work that is separable from other functions or activities
and is suitable for performance by contract.

A conversion
to contract is the changeover of an activity from Government
performance to performance under contract by a commercial
source.

A conversion
to in-house is the changeover of an activity from performance
under contract to Government performance.

A commercial
source is a business or other non-Federal activity located
in the United States, its territories and possessions, the
District of Columbia or the Commonwealth of Puerto Rico, which
provides a commercial product or service.

An inherently
Governmental function is a function which is so intimately
related to the public interest as to mandate performance by
Government employees. Consistent with the definitions provided
in the Federal Activities Inventory Reform Act of 1998 and
OFPP Policy Letter 92-1, these functions include those activities
which require either the exercise of discretion in applying
Government authority or the use of value judgment in making
decisions for the Government. Services or products in support
of inherently Governmental functions, such as those listed
in Attachment A, are commercial activities and are normally
subject to this Circular. Inherently Governmental functions
normally fall into two categories:

(1)
The act of governing; i.e., the discretionary exercise
of Government authority. Examples include criminal investigations,
prosecutions and other judicial functions; management
of Government programs requiring value judgments, as in
direction of the national defense; management and direction
of the Armed Services; activities performed exclusively
by military personnel who are subject to deployment in
a combat, combat support or combat service support role;
conduct of foreign relations; selection of program priorities;
direction of Federal employees; regulation of the use
of space, oceans, navigable rivers and other natural resources;
direction of intelligence and counter-intelligence operations;
and regulation of industry and commerce, including food
and drugs.

(2)
Monetary transactions and entitlements, such as
tax collection and revenue disbursements; control of the
Treasury accounts and money supply; and the administration
of public trusts.

A cost
comparison is the process of developing an estimate of
the cost of Government performance of a commercial activity
and comparing it, in accordance with the requirements of the
Supplement, to the cost to the Government for contract performance
of the activity.

Directly
affected parties are Federal employees and their representative
organizations and bidders or offerors on the instant solicitation.

Interested
parties for purposes of challenging the contents of an
agency's Commercial Activities Inventory under the Federal
Activities Inventory Reform Act of 1998 are:

(1)
A private sector source that (A) is an actual or prospective
offeror for any contract or other form of agreement to
perform the activity; and (B) has a direct economic interest
in performing the activity that would be adversely affected
by a determination not to procure the performance of the
activity from a private sector source.

(2)
A representative of any business or professional association
that includes within its membership private sector sources
referred to in (1) above.

(3)
An officer or employee of an organization within an executive
agency that is an actual or prospective offeror to perform
the activity.

(4)
The head of any labor organization referred to in section
7103(a) (4) of Title 5, United States Code that includes
within its membership officers or employees of an organization
referred to in (3) above.

Scope.

Unless
otherwise provided by law, this Circular and its Supplement
shall apply to all executive agencies and shall provide administrative
direction to heads of agencies.

This
Circular and its Supplement apply to printing and binding
only in those agencies or departments which are exempted by
law from the provisions of Title 44 of the U.S. Code.

This
Circular and its Supplement shall not:

(1)
Be applicable when contrary to law, Executive Orders, or
any treaty or international agreement;

(3)
Apply to the Department of Defense in times of a declared
war or military mobilization;

(4)
Provide authority to enter into contracts;

(5)
Authorize contracts which establish an employer-employee
relationship between the Government and contractor employees.
An employer-employee relationship involves close, continual
supervision of individual contractor employees by Government
employees, as distinguished from general oversight of contractor
operations. However, limited and necessary interaction between
Government employees and contractor employees, particularly
during the transition period of conversion to contract,
does not establish an employer-employee relationship.

(6)
Be used to justify conversion to contract solely to avoid
personnel ceilings or salary limitations;

(7)
Apply to the conduct of research and development. However,
severable in-house commercial activities in support of research
and development, such as those listed in Attachment A, are
normally subject to this Circular and its Supplement; or

(8)
Establish and shall not be construed to create any substantive
or procedural basis for anyone to challenge any agency action
or inaction on the basis that such action or inaction was
not in accordance with this Circular, except as specifically
set forth in Part 1, Chapter 3, paragraph K of the Supplement,
"Appeals of Cost Comparison Decisions" and as
set forth in Appendix 2, Paragraph G, consistent with Section
3 of the Federal Activities Inventory Reform Act of 1998.

The
requirements of the Federal Activities Inventory Reform Act
of 1998 apply to the following executive agencies:

(1)
an executive department named in 5 USC 101,

(2)
a military department named in 5 USC 102, and

(3)
an independent establishment as defined in 5 USC 104.

The
requirements of the Federal Activities Inventory Reform Act
of 1998 do not apply to the following entities or activities:

(1)
the General Accounting Office,

(2)
a Government corporation or a Government controlled corporation
as defined in 5 USC 103,

(3)
a non-appropriated funds instrumentality if all of its employees
are referred to in 5 USC 2105(c), or

(4)
Depot-level maintenance and repair of the Department of
Defense as defined in 10 USC 2460.

Government
Performance of a Commercial Activity. Government performance
ofa commercial activity is authorized under any of the following
conditions:

No
Satisfactory Commercial Source Available. Either no commercial
source is capable of providing the needed product or service,
or use of such a source would cause unacceptable delay or
disruption of an essential program. Findings shall be supported
as follows:

(1)
If the finding is that no commercial source is capable
of providing the needed product or service, the efforts
made to find commercial sources must be documented and
made available to the public upon request. These efforts
shall include, in addition to consideration of preferential
procurement programs (see Part I, Chapter 1, paragraph
C of the Supplement) at least three notices describing
the requirement in the Commerce Business Daily
over a 90-day period or, in cases of bona fide
urgency, two notices over a 30-day period. Specifications
and requirements in the solicitation shall not be unduly
restrictive and shall not exceed those required of in-house
Government personnel or operations.

(2)
If the finding is that a commercial source would cause
unacceptable delay or disruption of an agency program,
a written explanation, approved by the assistant secretary
or designee in paragraph 9.a. of the Circular, must show
the specific impact on an agency mission in terms of cost
and performance. Urgency alone is not adequate reason
to continue in-house operation of a commercial activity.
Temporary disruption resulting from conversion to contract
is not sufficient support for such a finding, nor is the
possibility of a strike by contract employees. If the
commercial activity has ever been performed by contract,
an explanation of how the instant circumstances differ
must be documented. These decisions must be made available
to the public upon request.

(3)
Activities may not be justified for in-house performance
solely on the basis that the activity involves or supports
a classified program or the activity is required to perform
an agency's basic mission.

National
Defense.

(1)
The Secretary of Defense shall establish criteria for
determining when Government performance of a commercial
activity is required for national defense reasons. Such
criteria shall be furnished to OMB, upon request.

(2)
Only the Secretary of Defense or his designee has the
authority to exempt commercial activities for national
defense reasons.

Patient
Care. Commercial activities performed at hospitals operated
by the Government shall be retained in-house if the agency
head, in consultation with the agency's chief medical director,
determines that in-house performance would be in the best
interests of direct patient care.

Lower
cost. Government performance of a commercial activity
is authorized if a cost comparison prepared in accordance
with the Supplement demonstrates that the Government is operating
or can operate the activity on an ongoing basis at an estimated
lower cost than a qualified commercial source.

Action
Requirements. To ensure that the provisions of this Circular
and its Supplement are followed, each agency head shall:

Designate
an official at the assistant secretary or equivalent level
and officials at a comparable level in major component organizations
to have responsibility for implementation of this Circular
and its Supplement within the agency.

Establish
one or more offices as central points of contact to carry
out implementation. These offices shall have access to all
documents and data pertinent to actions taken under the Circular
and its Supplement and will respond in a timely manner to
all requests concerning inventories, schedules, reviews, results
of cost comparisons and cost comparison data.

Implement
this Circular and its Supplementwith a minimum
of internal instructions. Cost comparisons shall not be delayed
pending issuance of such instructions.

Ensure
the reviews of all existing in-house commercial activities
are completed within a reasonable time in accordance with
the Federal Activities Inventory Reform Act of 1998 and the
Supplement.

Annual
Reporting Requirement. As required by the Federal Activities
Inventory Reform Act of 1998 and Appendix 2 of the Supplement,
no later than June 30 of each year, agencies shall submit to OMB
a Commercial Activities Inventory and any supplemental information
requested by OMB. After review and consultation by OMB, agencies
will transmit a copy of the Commercial Activities Inventory to
Congress and make the contents of the Inventory available to the
public. Agencies will follow the process provided in the Supplement
for interested parties to challenge (and appeal) the contents
of the inventory.

OMB Responsibility
and Contact Point. All questions or inquiries should be submitted
to the Office of Management and Budget, Room 6002 NEOB, Washington,
DC 20503. Telephone number (202) 395-6104, FAX (202) 395-7230.

Effective
Date. This Circular and the changes to its Supplement are
effective immediately.

Facility
management and operation
Printing and binding -- where the agency or department is exempted
from the provisions of Title 44 of the U.S. Code
Reproduction, copying, and duplication
Blueprinting

Real
Property

Design,
engineering, construction, modification, repair, and maintenance
of buildings and structures; building mechanical and electrical
equipment and systems; elevators; escalators; moving walks
Construction, alteration, repair, and maintenance of roads and
other surfaced areas
Landscaping, drainage, mowing and care of grounds
Dredging of waterways